Economic concepts served hot with pizza

Khushboo Khandelwal

As teachers of children in a modern world, we are expected to reach out to our students and customize our teaching strategies to suit both sets of students – those that are curious and look forward to learning, and those that wonder why they need to learn. And it is a challenge teaching both these sets of students.

In my years of teaching, I have observed three things in students.

• No matter whether good or average, students start losing their concentration after 15 to 20 minutes if there is no activity in class.
• It is very important for the students to understand the rationale behind their learning. My students often ask me, “How useful and applicable is what I am learning in life?”
• They love an element of surprise in the class.

I often try different activities and methods of teaching in my class so that both my students and I never feel fatigued with learning. Of course not all these activities are successful with my students, but here I share with you one that I received good reviews for from my class.

The fundraiser
Stage 1: Planning the fundraiser

• Ask your students to organize a small fundraiser.
• Let them start by thinking about what resources they will require. Make a list.
• Students can be given a small loan from the school to help them begin.
• Let them brainstorm what they want to produce or sell and note down their choices. List the top three choices.
• Ask your students to do a quick survey in the school to understand the choice of the consumer group, the demand for different products, and the price the consumers are willing to pay for the products.
• Let a group of students collate the results of the product demanded and the price the consumers are willing to pay. Write the top three choices with the price range.

Reflection

• Did the top three choices of the student group meet the top three choices of the consumer group?
• If the choices differ ask the students what they will do. Will they continue to sell what they decided upon? Or will they sell what the consumer group wants?
• Can they sell all the products they thought of or will they have to choose? Why? What about the choices that they let go?

Stage 2: Organizing and observing the fundraiser

My students decided to sell two variants of pizza (Pizza 1 and Pizza 2). Rather than selling the whole pizza, they decided to sell them as slices.

The biggest challenge was to set the price of each slice of pizza. Some students wanted to keep it very high to maximize profit, while others felt that the price should match the consumer survey results.

The students decided to keep the price at Rs 60 per slice, though the survey suggested that some students were willing to pay up to Rs 100 per slice.

After estimating the demand from the survey, the students decided to break the order for pizzas into two parts – Order 1 and Order 2.

In Order 1 they ordered 20 large Pizza 1 and Pizza 2. The slices were being sold at Rs 60. It was observed that the first choice of the students was Pizza 1. All the consumers were demanding it and it was getting consumed quickly. The students then experimented by lowering the price of Pizza 2 to Rs 50 per slice to see if this increased its demand.

Two students were asked to record and collect all the data. Before placing Order 2, I asked the students to re-think the quantities of Pizza 1 and Pizza 2 to be ordered.

The students not only increased the supply of Pizza 1 to 30, but also increased the price per slice to Rs 80. When it came down to the last few slices, the students decide to bid them away.

Some students were asked to record the prices of the bid and the number of takers at each price.

The last slice of pizza sold at Rs 150.

Reflection

• Was the demand for both pizzas equal?
• Did changing the price of Pizza 2 lead to a change in its demand?
• Before placing the second order, the students altered the supply of the pizzas. What made them do this?
• Were they able to meet the demand of all the consumers?
• Why did they think of inviting students to bid for the last few slices? Was it ethical or fair to the consumers?
• Were some consumers willing to pay more than Rs 150?

Relating learnings from the activity to economics concepts

• The students may have wanted to sell many products, but the money and time they had were limited. There were many buyers for the pizza slices, but the pizzas were limited. Relate this to: Scarcity is the most basic economic problem that requires people to make choices on how to use the limited resources.
• Choosing to sell pizza over other products was an economic choice. What about the options they let go? Relate this to: As scarcity exists, we must make choices about how to allocate our scarce resources. A choice may lead to an opportunity cost.
• The students had to choose what good they wanted to produce or sell, how they produced it, and for whom. Relate this to: Allocation of scarce resources and the economic system.
• The students based their decision of what to produce or sell on the choices listed by the consumers in the survey. Relate this to: In a market economy system it is the spending or demand of the consumer that determines what, how, and for whom to produce.
• The aim of the students was to generate as much money as they could from the fundraiser and thus their motive was to make maximum profit. Relate this to: The profit motive acts as an incentive for people to produce and sell goods and services.
• The students took the survey to compare their choices of producing or selling products with those suggested by the consumers and the price range they were ready to pay for a product. Relate this to: Demand: the willingness and ability to buy a product. You can use the result of the survey to make the demand schedule and plot the demand curve.
• The students initially set the price based on the result of the survey, but later changed it for both pizzas. Relate this to: Buyers and sellers voluntarily interact in markets, and market prices are set by the interaction of demand and supply.
• The increasing demand for Pizza 1 led to a rise in price to Rs 80 per slice. Relate this to: Price signal. Prices act as signals from buyers to sellers as to what is most demanded by the society.
• The pizza slices were initially sold at Rs 60 each, though some consumers were ready to pay up to Rs 100. Relate this to: Consumer surplus. The difference between what you are willing to pay and what the price actually is.
• The students sold the last few slices through bidding and the highest bidders got the pizza, while the others did not. Relate this to: Fairness in the price system and allocation of resources.

You can modify the activity and think of other economics concepts to relate to it. This activity can also be linked to various business concepts and was very popular with my students. If you decide to try this activity and choose pizza as a product “be very careful” as it can get very tempting and you and the students may end up eroding the profit through self-consumption!

The author is a IBDP and IGCSE business and economics teacher at Pathways School Noida. She can be reached at khushboo.khandelwal@pathways.in.